Acct 2001 Ch. 6 Smartbook

At the end of the month, Brown Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery expenses of $46. It started out with $100 in the fund at the beginning of the month. Brown Co.'s journal entry to replenish the fund would include which of the following? Cash is debited for $96. Petty Cash is credited for $96. Petty Cash is debited for $96. Cash is credited for $96.

Cash is credited for $96.

Identify the basic internal control guidelines which should be in place to protect a business's cash by selecting the correct answers below. Cash payments are made by check. Excess cash should be left in the bank to maintain liquidity. Handling cash is separate from recordkeeping of cash. Bills should be paid immediately. Cash receipts are promptly deposited in a bank.

Cash payments are made by check. Handling cash is separate from recordkeeping of cash. Cash receipts are promptly deposited in a bank.

Jackson Co. needs to replenish its petty cash fund. Currently, it contains $11 in cash and receipts for supplies of $40 and delivery expenses of $49. The fund was initially established with $100. Demonstrate the journal entry to replenish the account by choosing the correct actions from those below. Delivery Expense is debited for $49. Petty Cash is credited for $89. Cash is credited for $89. Supplies Expense is debited for $40. Petty Cash is debited for $89.

Delivery Expense is debited for $49. Cash is credited for $89. Supplies Expense is debited for $40.

Determine which of the items below would appear in the Deposits column of a bank statement and would cause an increase in the account's balance. Deposits made during the month Interest paid by the bank on the bank account balance A note collected by the bank on behalf of the account owner Checks written by the account owner A returned uncollectible customer check

Deposits made during the month Interest paid by the bank on the bank account balance A note collected by the bank on behalf of the account owner

Determine which of the statements below accurately describe services provided by a bank. Each bank deposit is supported by a deposit ticket. Each bank deposit is supported by a check. To withdraw money from an account, the depositor can use a check. A bank account is a record set up by a bank for a customer. To limit access to a bank account, all persons authorized to write checks on the account must sign a deposit slip.

Each bank deposit is supported by a deposit ticket. To withdraw money from an account, the depositor can use a check. A bank account is a record set up by a bank for a customer.

Select the items below that would cause the bank statement balance to differ from the depositor's book balance. Bank Service charges, Deposit in transit, Cleared checks NSF check, Outstanding checks, Supplies expenses Cleared checks, Bank service charge, NSF check NSF check, Deposit in transit, interest paid by bank

NSF check, Deposit in transit, interest paid by bank

Choose the statement below which is correct regarding which bank reconciliation items require adjusting journal entries. All items reconciling both the bank balance and the book balance require adjustment. Only the items reconciling the bank balance require adjustment. Only the items reconciling the book balance require adjustment.

Only the items reconciling the book balance require adjustment.

Review the following statements regarding a petty cash fund used in a business and select the one that is correct. Only the petty cashier is responsible for paying cash from the fund. The cashier of a fund will write checks for small payments like postage, supplies and deliveries. A petty cash fund is controlled by top management. A check written against the fund is cashed when the fund is replenished.

Only the petty cashier is responsible for paying cash from the fund.

Determine the statements below that are true regarding why a bank reconciliation is used. The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger. We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two. Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation. The Cash account balance in the general ledger is accurate, but the bank statement balance is not.

The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger. We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two. Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation.

Determine which of the statements below are accurate regarding how a petty cash fund is created and used in a business. The petty cashier is responsible for keeping the cash in the fund safe. When the fund is replenished, the petty cash fund account is debited. Any employee may disburse cash from the fund as long as they bring back a receipt for their purchase. The petty cashier is responsible for making payments from the petty cash fund. A check is drawn by the company cashier to establish the petty cash fund. The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time.

The petty cashier is responsible for keeping the cash in the fund safe. The petty cashier is responsible for making payments from the petty cash fund. A check is drawn by the company cashier to establish the petty cash fund. The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time.

In preparing a monthly bank reconciliation, a business follows several steps. Place the selected steps below in the correct order of occurrence. enter the company's book balance compute the adjusted bank balance enter the bank statement balance then add any unrecorded deposits and subtract any outstanding checks subtract any unrecorded bank fees, NSF checks, and errors overstating the book balance add any unrecorded cash receipts, interest earned, and errors understating the book balance compute the adjusted book balance and compare it to the adjusted bank balance to verify equality

enter the bank statement balance then add any unrecorded deposits and subtract any outstanding checks compute the adjusted bank balance enter the company's book balance add any unrecorded cash receipts, interest earned, and errors understating the book balance subtract any unrecorded bank fees, NSF checks, and errors overstating the book balance compute the adjusted book balance and compare it to the adjusted bank balance to verify equality

At the end of the month, ABC Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery expenses of $44. It started out with $100 in the fund at the beginning of the month. Demonstrate the journal entry to replenish the account and recognize its shortage by choosing the correct action from those given below. Cash is credited for $96. Petty Cash is debited for $96. Cash is credited for $98. Cash is credited for $94.

Cash is credited for $96. reasoning: Petty Cash is debited for $96. the expenses are debited, not petty cash Cash is credited for $98. when the fund is replenished, cash is credited. the amount is computed as the beginning balance minus the ending balance. $100 - $4 = $96

Jackson Brothers established a petty cash fund of $200 at the beginning of the year, but it decides to reduce the amount in the fund to $130. Demonstrate the correct journal entry to reduce the amount in the account by choosing the correct action from those given below. Petty Cash is credited for $130 and Miscellaneous Expense is debited for $130. Cash is debited for $130 and Petty Cash is credited for $130. Cash is debited for $70 and Petty Cash is credited for $70. Petty Cash is debited for $70 and cash is credited for $70.

Cash is debited for $70 and Petty Cash is credited for $70.

Choose the items below that would increase the depositor's book balance on a bank reconciliation. Deposit in transit Monthly bank service charge Interest earned on the depositor's account Note collected by the bank for the depositor Monthly check charges assessed by the bank NSF customer check

Interest earned on the depositor's account Note collected by the bank for the depositor

Select the items below that would cause the bank statement balance to differ from the depositor's book balance. Cleared checks, Bank service charge, NSF check NSF check, Deposit in transit, interest paid by bank NSF check, Outstanding checks, Supplies expenses Bank Service charges, Deposit in transit, Cleared checks

NSF check, Deposit in transit, interest paid by bank

At the end of the month, Brown Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery expenses of $46. It started out with $100 in the fund at the beginning of the month. Brown Co.'s journal entry to replenish the fund would include which of the following? Cash is debited for $96. Petty Cash is credited for $96. Cash is credited for $96. Petty Cash is debited for $96.

Cash is credited for $96.

Describe the internal control principle of dividing responsibility for related transactions by selecting the correct statements below. This principle calls for a duplication of work so that comparisons can be made. Examples of transactions with divided responsibility are placing inventory orders and paying vendors. This principle helps to make sure that the work of one individual acts as a check on another individual's work on a related transaction. This principle is often called separation of duties.

Examples of transactions with divided responsibility are placing inventory orders and paying vendors. This principle helps to make sure that the work of one individual acts as a check on another individual's work on a related transaction. This principle is often called separation of duties.

Review the following statements regarding a petty cash fund used in a business and select the one that is correct. The cashier of a fund will write checks for small payments like postage, supplies and deliveries. Only the petty cashier is responsible for paying cash from the fund. A petty cash fund is controlled by top management. A check written against the fund is cashed when the fund is replenished.

Only the petty cashier is responsible for paying cash from the fund. reasoning: The cashier of a fund will write checks for small payments like postage, supplies and deliveries. the cashier will use the petty cash fund instead of writing checks for small payments A check written against the fund is cashed when the fund is replenished. the company cashier gives the petty cashier a check for the total of all receipts paid out of the fund. this restores the fund to its original amount

Determine which of the statements below is correct regarding information reflected on a monthly bank statement. Deposits that the company makes will be listed as debits to the bank account on the bank statement. The information on the bank statement reflects the customer's records. Withdrawals by the company will be listed as increases to the bank account on the bank statement. The information on the bank statement reflects the bank's records of the depositor's account.

The information on the bank statement reflects the bank's records of the depositor's account. reasoning: Deposits that the company makes will be listed as debits to the bank account on the bank statement. deposits increase the debt of the bank, so they will be listed as credits to the bank account Withdrawals by the company will be listed as increases to the bank account on the bank statement. withdrawals will be listed as decreasing to the account

Identify the factors that cause the bank statement balance to differ from the depositor's book balance by matching each to its definition on the right. outstanding check deposit in transit NSF check bank charges

outstanding check -> A check written by the depositor that has not yet been received by the bank for payment deposit in transit -> Deposit made and recorded by the depositor, but not yet recorded on the bank statement NSF check -> A check written by a customer who does not have enough money in his account to cover the check bank charges -> Service fees charged by the bank

Each of the following are types of technological impacts related to internal control: separation of duties maintaining adequate records new evidence of processing more extensive testing of records reduced processing errors establish responsibilities

separation of duties new evidence of processing more extensive testing of records reduced processing errors

Calculate the adjusted cash balance per the books of XYZ Co. given the following information. Balance per bank statement = $600 Balance per cash account book balance = $710 Deposit in transit = $200 Note collected by the bank on behalf of the depositor = $80 Monthly bank charges = $40 Outstanding checks = $50

$750 beginning balance ($70) + note ($80) - bank charges ($40) = $750

Review the items below and determine which would cause an increase in the monthly bank statement balance. Service fees charged by the bank Checks written during the month A customer's uncollectible check Cash deposits made by the account owner

Cash deposits made by the account owner

Demonstrate the required adjusting entry needed to record a $1,000 note receivable collected by the bank by choosing the correct entry below. Debit Notes Receivable $1,000 and credit Cash $1,000. Debit Cash $1,000 and credit Notes Payable $1,000. Debit Cash $1,000 and credit Notes Receivable $1,000. Debit Cash $1,000 and credit Accounts Receivable $1,000.

Debit Cash $1,000 and credit Notes Receivable $1,000.

The cash in a cash register equaled $100, but the record of cash receipts/sales equaled $102. Determine which of the following entries is correct to record cash sales and the shortage. Debit Cash $102; credit Cash Over and Short $2; and credit Sales $100. Debit Cash $100; credit Cash Over and Short $2; and credit Sales $102. Debit Cash $100; debit Cash Over and Short $2; and credit Sales $102. Debit Cash $102 and credit Sales $102.

Debit Cash $100; debit Cash Over and Short $2; and credit Sales $102.

The bank reconciliation of ABC Co. is provided below. Demonstrate the required adjusting entries needed to update the Cash account in the general ledger by selecting the correct entries below. bank balance = $1,005 add: deposit in transit $300 less: outstanding checks $185 book balance = $1,250 add: interest earned $50 less: NSF check $180 Debit Cash $50 and credit Interest Revenue $50. Debit NSF Expense $180 and credit Cash $180. Debit Cash $300 and credit Revenues $300. Debit Accounts Receivable $180 and credit Cash $180. Debit Interest Revenue $50 and credit Cash $50.

Debit Cash $50 and credit Interest Revenue $50. Debit Accounts Receivable $180 and credit Cash $180.

Internal control policies and procedures have limitations that arise from many elements. Match the limitation on the left with its definition on the right. Human Error Human Fraud Cost-benefit principle Internal Control Environment

Human error -> can occur from carelessness, misjudgment or confusion Human fraud -> involves intent by people to defeat internal controls for personal gain Cost-benefit principle -> dictates that the cost of internal controls must not exceed their benefits internal control environment -> management must convey commitment to internal control policies and procedures

Identify the item below that would be added to the book balance. Bank service charge Outstanding checks NSF check Interest earned

Interest earned

Review the following statements and select the ones which accurately describe a Petty Cash fund. It is an asset reported on the balance sheet. It is an expense reported on the income statement. It is established to pay for small payments like low-cost supplies and shipping fees, etc. It is an account used to record small sales amounts.

It is an asset reported on the balance sheet. It is established to pay for small payments like low-cost supplies and shipping fees, etc.

Which of the answers below correctly describe the Cash Over and Short account? It is an asset account. A debit balance reflects a revenue. It records the effects of cash overages and cash shortages. It is an income statement account. A debit balance reflects an expense.

It records the effects of cash overages and cash shortages. It is an income statement account. A debit balance reflects an expense.

Identify which of the items below are goals of good cash management. Keep a minimum level of cash necessary to operate. Keep a maximum level of cash available to pay for emergencies that develop Pay all bills immediately when received. Plan cash receipts to meet cash payments when due.

Keep a minimum level of cash necessary to operate. Plan cash receipts to meet cash payments when due.

Which statement below explains why liquid assets are needed in a business? The maturity value of liquid assets is sensitive to interest rate changes. Liquid assets must be available to pay current liabilities. Liquid assets are easier to protect and control. Liquid assets are purchased because they take longer to mature.

Liquid assets must be available to pay current liabilities.

Choose the items below that would be subtracted from the book balance on a bank reconciliation. Monthly check charges assessed by the bank Outstanding checks Interest earned on the depositor's account NSF customer check Monthly bank service charge Note collected by the bank for the depositor Cleared checks

Monthly check charges assessed by the bank NSF customer check Monthly bank service charge

Identify the item below that would be subtracted from the book balance on a bank reconciliation. Interest earned NSF check Deposit in transit Outstanding checks

NSF check

XYZ Co. decided to create a petty cash fund. They estimated that $100 would be needed in the fund. Demonstrate the correct journal entry to create the account by choosing the correct action from those below. Petty Cash is debited for $100. Petty Cash is credited for $100. Miscellaneous Expense is debited for $100. Cash is debited for $100.

Petty Cash is debited for $100.

Jackson Brothers decided to create a petty cash fund. They estimated that $200 would be needed in the fund. Demonstrate the correct journal entry to create the account by choosing the correct action from those below. Petty Cash is debited for $200; Cash is credited for $200. Miscellaneous Expense is debited for $200; Cash is credited for $200. Petty Cash is credited for $200; Miscellaneous Expense is debited for $200. Cash is debited for $200; Petty Cash is credited for $200.

Petty Cash is debited for $200; Cash is credited for $200.

Which of the statements below describe the goals and principles of cash management? Plan cash receipts to meet cash payments when due. Excess cash should be kept on hand to pay bills. Money should be spent only when it is available. Keep a minimum level of cash necessary to operate. Encourage quick collection of receivables. Encourage quick payment of liabilities.

Plan cash receipts to meet cash payments when due. Money should be spent only when it is available. Keep a minimum level of cash necessary to operate. Encourage quick collection of receivables.

Recall the preparation of a bank reconciliation by selecting the correct items below. Subtract any outstanding checks from the bank balance. Add deposits in transit to the bank balance. Compute the adjusted bank balance. Add any unrecorded bank fees to the bank balance. Compute the adjusted (depositor's) book balance. Add the deposits in transit to the book balance.

Subtract any outstanding checks from the bank balance. Add deposits in transit to the bank balance. Compute the adjusted bank balance. Compute the adjusted (depositor's) book balance.

Which of the statements below explains how technology has impacted internal control systems? Technology has encouraged the growth of e-commerce, which means that there is a higher risk of credit card number theft. Technology can be designed to require the use of password before access to the system is granted. Technologically advanced systems can record who made entries, the date and time of the entry and the source of the entry. Technology increases job creation and fewer job consolidations. Technology has reduced the number of processing errors.

Technology has encouraged the growth of e-commerce, which means that there is a higher risk of credit card number theft. Technologically advanced systems can record who made entries, the date and time of the entry and the source of the entry. Technology has reduced the number of processing errors.

A cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105. Review the statements below and determine which is correct regarding this discrepancy. The Cash account will be debited for $105. The Cash Over and Short account will be credited for $5. The extra $5 collected will be treated as a miscellaneous revenue. The Cash Over and Short account will be debited for $5. The Sales account will be credited for $105. The Sales account will be credited for $100.

The Cash account will be debited for $105. The Cash Over and Short account will be credited for $5. The extra $5 collected will be treated as a miscellaneous revenue. The Sales account will be credited for $100.

Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation. The adjusted balance per books must equal the cash balance printed on the bank statement. The cash balance on the bank statement must equal the cash balance in the general ledger before the bank reconciliation. The adjusted book balance will rarely equal the adjusted bank balance. The adjusted bank balance must equal the adjusted cash balance per books.

The adjusted bank balance must equal the adjusted cash balance per books.

There are several reasons why the petty cash fund would experience a shortage or an overage. Determine which of the actions below would result in a shortage or an overage in the petty cash fund. The company cashier reduced the petty cash account. The petty cashier obtained a receipt for the payment. The petty cashier underpaid for the amount due. The petty cashier failed to get a receipt for payment.

The petty cashier failed to get a receipt for payment.

Determine which of the items below would show up on a monthly bank statement. Withdrawals and other decreases to the account during the period Ending period balance in the account Beginning period balance in the depositor's account Deposits and other increases to the depositor's account during the period Withdrawals and other increases to the account during the period Checks that the company has written, but have not cleared the bank yet

Withdrawals and other decreases to the account during the period Ending period balance in the account Beginning period balance in the depositor's account Deposits and other increases to the depositor's account during the period

Show your understanding of what a bank reconciliation is by completing the following sentence. A bank reconciliation is a(n) ______________(entry/charge/report) explaining any differences between the _______________(checking/subsidiary/sales) account balance according to the depositor's records and the balance reported on the ________________(income/financial/bank) statement.

a bank reconciliation is a report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.

All of the following describe blockchain: blockchain makes it more difficult for the ledger to be modified without a detailed record of changes blockchain is continuously and simultaneously updated and verified blockchain cannot verify and facilitate Bitcoin transactions blockchain is a less secure type of accounting ledger

blockchain makes it more difficult for the ledger to be modified without a detailed record of changes blockchain is continuously and simultaneously updated and verified

Define what liquidity means by completing the following sentence. Liquidity refers to a company's ability to pay for its ______________ liabilities.

current

Brown Co. decides to increase the amount in its petty cash fund from 100 to $150. To show this increase in the petty cash account, you would: credit Cash for $150. debit Cash for $50. debit Petty Cash for $50. debit Petty Cash for $150.

debit Petty Cash for $50.

Match the banking term on the left with its definition on the right. deposit ticket check bank account remittance advice electronic funds transfer

deposit ticket -> lists currency, coins and checks deposited into an account check -> a document signed by the depositor instructing the bank to pay a specified amount of money bank account -> used to deposit money for safekeeping and help control withdrawals remittance advice -> explains the reason for payment electronic funds transfer -> electronic transfer of cash from one party to another

Each of the following are types of technological impacts related to internal control: maintaining adequate records reduced processing errors more extensive testing of records establish responsibilities new evidence of processing separation of duties

reduced processing errors more extensive testing of records new evidence of processing separation of duties

Describe what a petty cash fund is by completing the following sentence. A petty cash fund is used for ____________(large/small) payments

small

The adjusted book balance and the adjusted bank balance must equal each other on a bank reconciliation; otherwise, the cash account is not reconciled. true false

true